Shawbrook Group H1 2026 Earnings Report

Shawbrook Group EPS Results

• Actual EPS: GBX 25.30
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Shawbrook Group Revenue Results

• Actual Revenue: N/A
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Shawbrook Group Announcement Details

• Quarter: H1 2026
• Date: 8/5/2026
• Time: Before Market Opens
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 2:45AM ET

Shawbrook Group (LON:SHAW) is a lending and savings bank. The Company operates through four segments: Property Finance, Business Finance, Consumer Lending and Central. The Property Finance segment provides mortgages for investors, businesses and personal customers. It serves professional landlords and property traders in residential and commercial asset classes across long-term and shorter-term finance. The Business Finance segment includes propositions, such as the Regional Business Centers that provide finance solutions; Structured Finance proposition, which consists of lending to small and medium enterprise (SME) finance companies, and Specialist Sectors proposition, which consists of leasing and hire purchase finance solutions. The Consumer Lending segment provides unsecured loans for various purposes, primarily focused on home improvements, holiday ownership, personal loans and certain retailers. The Central segment includes its treasury function and Consumer Savings business.

Shawbrook Group H1 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Strong first-half performance: Underlying profit before tax rose 16% to £195.5 million, net operating income increased 15%, and underlying return on tangible equity remained robust at 18.1%.
• Positive Sentiment: The loan book grew 10% on an annualized basis to £20.1 billion, led by strong SME growth and continued momentum in retail mortgages and motor finance; management reiterated its full-year target of approximately £21 billion.
• Positive Sentiment: Operating leverage continued to improve, with the cost-to-income ratio falling to 36.4% as income growth outpaced a 5% increase in administrative expenses. Management highlighted further efficiency potential from platform consolidation, automation, and AI.
• Positive Sentiment: CET1 capital increased to 13.0% and total capital to 16.4% following a £250 million AT1 issuance; the company maintained its guidance for CET1 above 13.2% and reaffirmed plans for its first ordinary dividend in 2027.
• Negative Sentiment: Impairment losses increased to £50.7 million, including a further £15.6 million provision against a pre-2022 development-finance portfolio. Management expects the portfolio to reduce over time, but additional provisions remain a risk, while Basel 3.1’s eventual capital impact is still being finalized.

Presentation

[Marcelino Castrillo, CEO at Shawbrook]

Good morning, everyone. Welcome to the Shawbrook half year 2026 results presentation. I am Marcelino Castrillo, CEO, and with me today is our CFO, Dylan Minto. We have a lot to cover this morning. My own personal reflections on the first half of 2026 can be summed up as follows. We have delivered a strong set of numbers on plan and/or on track. We have a business that delivers efficient growth within a large and diverse market, with plenty of runway ahead. That combination of tech capability and the expertise and skills of our people give us a competitive advantage, which is now amplified by AI. We are ambitious. We ask a lot of our colleagues and partners, I want to thank them all for their hard work and contribution to delivering the performance that we will talk through now.

[Marcelino Castrillo, CEO at Shawbrook]

Shortly, Dylan will take you through the financial results in detail. I will cover how we are continuing to leverage our tech and data capabilities to accelerate and benefit from the deployment of AI, further supporting the efficiency of our platform, which underpins Shawbrook's ability to scale our specialist proposition across diverse markets. You will see the evidence of this efficient growth in the numbers we present today. There will be an opportunity to ask questions at the end. We've had a strong first half. The results show double-digit growth, attractive returns, efficiency improvements, and strong capital accretion. Underlying profit before tax increased by 16%, while underlying return on tangible equity remained strong at 18.1%. The loan book achieved double-digit growth, 10% on an annualized basis. We continue to deploy capital efficiently and selectively, prioritizing risk-adjusted returns.

[Marcelino Castrillo, CEO at Shawbrook]

We have continued to deliver efficient growth. Once again, income has grown materially faster than costs. Cost-to-income ratio improved to 36.4%, as did the underlying cost to APE efficiency ratio, from 1.74% to 1.59%. Credit performance remained resilient. Cost of risk was 57 basis points, consistent with the group's historic level of credit performance. Net write-offs of 13 basis points remained well below our historical median of 29 basis points. We have also continued to optimize the balance sheet. CET1 increased to 13%, approximately 60 basis points of accretion in the first half, whilst total capital rose to 16.4% following our GBP 250 million AT1 issuance in May. We are reiterating our full year 2026 guidance today, with medium-term guidance remaining unchanged. Taken together, these results demonstrate the strength of the model and the quality of our execution during the first half of 2026.

[Marcelino Castrillo, CEO at Shawbrook]

The dynamics within our markets are increasingly sophisticated. Customer needs are constantly evolving as a result. These are the factors that reward the expertise, breadth, and scale of the specialist business we have built. Data, automation, and AI are giving us deeper insights into our customers and markets whilst enhancing the ability to execute more quickly and consistently. Together with the entrepreneurial culture we have within the bank, which enables streamlined decision-making, we're able to respond quickly and confidently as market conditions change. Continuous portfolio monitoring and forward-looking risk management support resilient credit performance through that change. Diversified markets, specialists at scale, technology-enabled, credit discipline, and our entrepreneurial culture. It's a combination of these strategic strengths that allow us to keep delivering consistently strong performance and efficient growth through market cycles.

[Marcelino Castrillo, CEO at Shawbrook]

Our track record clearly demonstrates a consistent execution of this strategy and the durability of the value we generate. Since 2017, net loans have grown at a compound annual growth rate of 18%, and underlying profit before tax has grown at a similar pace. We have delivered this strong growth while maintaining an underlying return on tangible equity in the high teens. In short, we have demonstrated that we can deliver efficient growth while maintaining strong returns and disciplined credit performance across multiple specialist lending markets and through very different economic conditions. This gives us the confidence in our ability to continue meeting the evolving needs of the customers and markets we choose to serve. With that, I will hand it over to Dylan to take you through H1 2026 financials in more detail.

[Dylan Minto, CFO at Shawbrook]

Thank you, Marcelino. I'll go into more detail on our financial performance for the first half, together with a summary of the capital position and a full-year 2026 outlook. Let me start with the headline numbers. Underlying profit before tax was GBP 195.5 million, up 16%. Net operating income grew 15% to GBP 387.2 million, primarily led by a 14% increase in net interest income to GBP 354.6 million. That reflects strong originations which were up 13% year-on-year and continued discipline on margins. Other income included a GBP 25.8 million gain from two originate-to-distribute transactions that we completed in the first half as we took advantage of attractive conditions in the debt capital markets, bringing forward a trade we might otherwise have transacted later in the year.

[Dylan Minto, CFO at Shawbrook]

Underlying profit before tax was up 17% when excluding the gain on sale from our originate-to-distribute activity, underlying the fact there are multiple drivers of our growth. Just as a reminder, we originate these loans across our retail mortgage brands business. These are asset classes we find attractive through the cycle, and our starting assumption is that we'll hold these to maturity. We'll only sell at attractive price points in conducive markets. These transactions give us flexibility to optimize the balance sheet for efficiency, liquidity, and returns, and to redeploy capital into higher returning opportunities. This is the optionality we've built into the platform and one we've taken advantage of in this half. Administrative expenses grew 5%, well behind the 15% growth in net operating income.

[Dylan Minto, CFO at Shawbrook]

It's this positive operating leverage, the widening of jaws between income and costs, that's a structural feature of our model, and it continues to come through as we scale the platform. Impairment losses rose to GBP 50.7 million, and I'll cover the drivers behind this in more detail shortly, but the increase predominantly reflects the pre-2022 development finance vintage. Underlying basic earnings per share increased 15% to GBP 0.265, driven by the growth in profit before tax. If we turn to the loan book, we continued to grow across our core markets, with the total book reaching GBP 20.1 billion inclusive of the OTD activity. That's a 10% annualized increase over the six months, and 18% higher year-on-year. Our strategy remains anchored to risk-adjusted returns. We're not targeting volume in isolation and will continue to deploy capital where it meets our hurdle.

[Dylan Minto, CFO at Shawbrook]

Taking the different markets in turn, real estate grew by 8%, reflecting continued demand within our target segments. SME grew by 17% with the follow-on ThinCats portfolio acquisition enhancing both the scale and mix of the business. Our retail mortgage brands business, incorporating The Mortgage Lender and Bluestone Mortgages branded products, grew by GBP 0.3 billion. Within consumer finance, growth in our JBR Motor Finance business offset the run-off portfolios as we pursued our strategy to reallocate capital between these markets. Looking ahead, our pipeline remains strong across these markets. We also continue to focus on retention, extending customer relationships, and reducing the cost to serve while structural efficiency continues to reduce costs relative to income with more still to come. I want to cover the returns for each of our four segments. I'll do this by showing the risk-adjusted net operating income divided by the risk-weighted asset density.

[Dylan Minto, CFO at Shawbrook]

This is the lens through which we manage the business, not headline net interest margin, but risk-adjusted returns on the capital we deploy into those markets. At a group level, risk-adjusted net operating income over risk-weighted asset density was unchanged at 5.5%, with returns across the four segments remaining in a relatively tight range. If I take each in turn, consumer finance increased 0.2 percentage points to 6.3%, driven by the exit of unsecured personal loans and a deliberate reallocation towards JBR Motor Finance. SME was stable at 4.8%, supported by disciplined front book pricing and the ThinCats acquisition. Retail mortgage brands increased 1.6 percentage points to 8.6%, supported by the originate-to-distribute gains. Even excluding that gain, the ratio increased 0.4 percentage points to 5.4%, evidence of genuine underlying improvement. Real estate reduced 0.5 percentage points to 4.7%, driven by a limited number of specific provisions.

[Dylan Minto, CFO at Shawbrook]

The point across this page is one of flexibility. We reallocate capital across these segments as risk-adjusted economics evolve. It's that diversification that underpins the consistency of our performance through cycle. Turning to credit quality. Credit performance in the first half was resilient. Let me break down the headline cost of risk. Impairment losses on financial assets were GBP 50.7 million, a cost of risk of 57 basis points. This includes approximately GBP 2.6 million of day one expected credit loss recognized on the ThinCats portfolio. Excluding that item, the cost of risk would have been 54 basis points. The ring-fenced vintage of pre-2022 development finance loans that we discussed at full year 2025 generated a further GBP 15.6 million charge. This portfolio consists of a handful of loans totaling GBP 148 million of balance and continues to be actively managed.

[Dylan Minto, CFO at Shawbrook]

Excluding those two items, the cost of risk would have been 37 basis points. The cost of risk is consistent with our business model. As you can see on the left-hand side of the page, the first half cost of risk sits well within the historical range. Turning to stage mix. The mix has held broadly stable with stage 1 balances at 88.4%. Stage 3 accounted for 3.7% of the book at the end of the half. The main driver is the pre-2022 development finance vintage I just walked you through. Those loans were classified as stage 3 at the start of the period and have remained there, representing approximately a quarter of our total stage 3 balance. This vintage therefore generated provision charges rather than new stage 3 migration.

[Dylan Minto, CFO at Shawbrook]

The coverage on that vintage increased to 35% at June 2026, with around half of that impairment charge attributable to discounting future cash flows from the sale of these largely finished units. Cohorts written after this vintage continued to perform in line with expectations. New migration into stage 3 during the half remained lower than historical averages. The stage 3 increase reflects the timing on the development finance book, which hasn't moved. Outflows are typically weighted to the second half of the year. Total loss allowance increased to 1.35% from 1.14% at full year 2025. Taken together with our flat arrears metric of 1.7% and net write-offs remaining well below historical median average, the portfolio continues to perform in line with expectations, supported by disciplined underwriting and our data-driven approach to risk management.

[Dylan Minto, CFO at Shawbrook]

The portfolio itself remains well protected with granular 56% of exposures below GBP 1 million and a weighted average LTV on the property exposures of the book at 67%. Turning to funding, deposit balance has increased to GBP 18.8 billion, a 4.9% annualized increase with the loan-to-deposit ratio reducing to 93.9%, down from 96.8% at full year 2025. It's that reduction that gives us the flexibility to moderate the pace of deposit growth as we go through the second half of the year and supporting loan book growth. The balance sheet remains predominantly retail funded. Around 91% of our funding base is retail deposits, with approximately 96% of those balances FSCS insured, and the book remains granular by nature. Our liquidity remains strong. Our cost of deposits reduced from 3.92% to 3.80%. That reflects the strength of our digital savings proposition anchored on service quality.

[Dylan Minto, CFO at Shawbrook]

Our broad product suite, channel diversification, and our multi-brand portfolio gives us levers beyond simply chasing rate. For example, on distribution, alongside our own brands, we access the market through seven partner relationships representing GBP 7 billion of deposit balance. It's that combination of scale, brand, and channel that gives us multiple levers to grow the book without needing to lead on price. With nearly 2,000 savings products across our various distribution channels, we can compete selectively where it makes sense rather than needing to compete on every product at once. We also continue to diversify funding through access to wholesale funding markets, and we have significant collateral positioned within central bank funding facilities. Turning to capital, CET1 increased to 13.0% from 12.4% at December 2025. Let me walk you through the bridge. We generated 0.9% of organic capital in the first half.

[Dylan Minto, CFO at Shawbrook]

That was driven by 1.1% of CET1 from retained earnings, partially offset by approximately 0.3% of RWA growth from lending. The organic accretion included approximately 57 basis points of benefit from those OTD transactions in the period, transactions we had planned to execute to bolster CET1 prior to Basel 3.1 commencing next year. Corporate activity reduced the ratio by 0.1%, reflecting risk-weighted assets from the ThinCats portfolio acquisition. Post half year, you'll see that we've agreed the sale of our GBP 0.3 billion Blue Motor Finance loan book already classified as held for sale in the interim report. That releases a similar amount of CET1 back. This is ordinary course balance sheet management, recycling capital to more attractive opportunities. While other items reduced it by a further 0.2%, mainly driven by the increase in operational risk RWAs, they will not be repeated in the second half.

[Dylan Minto, CFO at Shawbrook]

That leaves a CET1 surplus of GBP 410 million, equivalent to 3.3% of headroom above our 9.7% fully loaded CET1 regulatory requirement. Total capital increased to 16.4% from 14.8% at full year 2025, following our very successful GBP 250 million AT1 issuance that we completed in May, alongside the early tender to redeem our existing GBP 124 million instrument. We saw an opportunity to come to market earlier than anticipated with that trade. We resulted in a materially lower coupon and a significant upsize in our AT1 stack that further optimizes the capital structure. Given this progress, we're confident in delivering our 2026 CET1 guidance of above 13.2% on a pre-Basel 3.1 basis. Our Basel 3.1 impact remains unchanged, we're confident we can absorb the impact of Basel 3.1 whilst preserving our capacity to support growth and the expected maiden ordinary dividend.

[Dylan Minto, CFO at Shawbrook]

After a strong first half, today we are reiterating our full year 2026 guidance in full with medium-term guidance unchanged. We continue to expect a loan book of approximately GBP 21 billion, a cost-to-income ratio below 38%, a CET1 ratio above 13.2% on a pre-Basel 3.1 basis, and an underlying return on tangible equity of approximately 17%. We're also reaffirming our commitment to a maiden ordinary dividend in respect of 2026 results payable in 2027. We're entering the second half with good momentum. We remain confident in our ability to deliver on our full-year guidance. With that, I will hand you back to Marcelino.

[Marcelino Castrillo, CEO at Shawbrook]

Thank you very much, Dylan. As I said in the outset, throughout the first six months of the year, we have continued to deliver efficient growth enabled by the investments we have made in technology. I will cover some specific examples in just a moment, but the benefits are material. In H1, the underlying cost-to-income ratio reduced to 36.4% and the cost to APE efficiency ratio improved to 1.59%. The cost base has remained well controlled even as we continue to invest in the capabilities needed to support growth. As a result, income has continued to grow materially faster than costs, with the widening of the jaws accelerating. On the right-hand side, we have shown the cost base on a normalized basis to provide a like-for-like comparison that includes the acquisitions we made in 2025.

[Marcelino Castrillo, CEO at Shawbrook]

While the organic book grew approximately 14% year-on-year, normalized costs have reduced by 5% in the same period. This is a combination of extracting integration benefits from last year's acquisitions, but also delivering further efficiencies on an underlying basis. As the platform continues to scale, we expect to generate growth at a reducing incremental cost, giving us a clear trajectory towards our medium-term cost-to-income guidance of mid-30%. Let me bring this to life with some tangible examples of how we continue to refine how we operate, preserving simplicity and driving efficiency. First, we have brought together our retail mortgage brands and real estate operations into a single team, allowing us to maintain the specialist nature of what we do while scaling up the volumes we can process.

[Marcelino Castrillo, CEO at Shawbrook]

Second, we are migrating customers to a common core banking platform across our markets and asset classes, allowing us to serve customers more efficiently. Third, we are consolidating our physical footprint into three core hubs. These locations, where we already have an established presence, provide us with both deep pools of talent and coverage across important regional markets. Within SME, we have now completed the integration of Playter and migrated our entire digital business lending proposition onto the Playter platform. This gives us growth-focused businesses a clear proposition, speed, simplicity, and breadth of funding through Playter's AI-native platform. Finally, customers are increasingly choosing to self-serve, particularly within savings. For instance, the volume of inbound messages and calls has dropped 35% since the introduction of AI-enabled service enhancements.

[Marcelino Castrillo, CEO at Shawbrook]

Customer satisfaction scores remain at an exceptionally high 92%. This is, in my view, another good example of how we deliver efficient growth. The next wave of efficiency gains will come through the application of AI across the organization. As I have mentioned before, the digital capabilities we have built in the business over the last few years are one of the most important components of our business model. Our exceptional team of engineers, product specialists, data scientists, and other technologists working effectively across the business means we are in a unique position to take advantage of any technological development. AI is another good example, as we're already building, testing, and deploying agentic systems across each stage of the lending cycle.

[Marcelino Castrillo, CEO at Shawbrook]

This technology is enriching our specialist proposition by freeing our people to spend more time on the interactions and activities that matter most in specialist lending, things like relationship management, oversight, and judgment that technology cannot replicate. We have multiple use cases that are live and being used by our teams today. In originations, we have built a multi-agent system in SME that prioritizes inbound inquiries and produces an indication of terms on the same day for qualifying deals, potentially saving days per deal and increasing conversion rates as a result. In underwriting, our real estate team built a system that synthesizes transaction information and generates valuation review documents, targeting a reduction in time spent on underwriting tasks of up to 50%, and we're also improving accuracy and consistency.

[Marcelino Castrillo, CEO at Shawbrook]

Also in real estate, our portfolio management agent automates annual reviews, targeting a reduction in turnaround time to less than a day. In each case, specialist judgment remains at the center. AI increases the speed and capacity with which our people apply it. Generative AI is also delivering tangible results, particularly within our software development teams. We're seeing a productivity gain of approximately nine times on AI-assisted work. Up to 85% of the code is now written by AI agents, and pretty much the totality of that code also auto reviewed by AI agents. Our advantages in technology and data have given us the means and foundation to rapidly adopt and deploy AI.

[Marcelino Castrillo, CEO at Shawbrook]

I am very pleased to see the breadth and depth of this adoption right across the organization and confident in its potential to amplify our specialist proposition and allow us to continue to deliver efficient growth in the years to come. To close, a half that reinforces our confidence in both the strategy and the growth opportunity ahead. We are delivering on what we set out to do, producing a strong and efficient growth, sustaining attractive returns and generating capital, all within a disciplined risk framework. We're cognizant, of course, of the macroeconomic background, but we see plenty of opportunity across our diversified business model while maintaining a disciplined approach focused on high risk-adjusted returns. Our digital capabilities, now further amplified by AI, allow us to keep growing safely well ahead of our cost base. This is what we have described today as efficient growth.

[Marcelino Castrillo, CEO at Shawbrook]

We have made good progress in H1, and we remain confident in our full-year outlook. Thank you very much, and we look forward to your questions. Okay, Murray, are you taking this one from here?

[Murray Long, Head of Investor Relations at Shawbrook]

Thanks. Moving over to Q&A. Just a reminder, if you haven't asked questions yet, you can ask questions through the portal. First question, I've grouped a few together here on deposits. Please walk us through how you're seeing competition in the deposit market and how that plays out into the second half of the year.

[Marcelino Castrillo, CEO at Shawbrook]

Yeah. Shall I cover that first, Dylan?

[Dylan Minto, CFO at Shawbrook]

Yes.

[Marcelino Castrillo, CEO at Shawbrook]

First of all, what we see is a very deep deposit market. We're talking a market of in excess of half a trillion savings, of which we currently have less than 5%. Also it's incredibly diversified, so it's very difficult to talk about deposit markets as one single entity. What we have seen, and I think is kind of mentioned in the presentation, some parts of that market are more competitive than they were a few months ago, but also that falls within the natural ebbs and flows of the market. What I would say, and I think Dylan covered it well before, is we see our deposit and savings business as one of our key competitive advantages. One is a digital service-led proposition.

[Marcelino Castrillo, CEO at Shawbrook]

Two, the great diversification around product channel, tax wrapper, no tax wrapper term brand gives us 2,000 different products in the market today which coupled with the pricing capabilities we have built on the back of all the data that we have gathered over the years, again, gives us incredible flexibility. On top of that, we have our wholesale funding options that allow us a way out of those deposit markets when they become very competitive.

[Dylan Minto, CFO at Shawbrook]

Yeah. Just add to that, we've been very adept at managing the cost of the retail deposit portfolio. We've brought down, as I'd said, the total stock cost of the deposits from 3.92% at the end of the year to 3.8% at the half year. We also have that loan-to-deposit ratio at the 93.9%. We have room in the second half of the year that gives us flexibility on how and when we access retail deposit markets, which are a very important component part of funding the balance sheet. The 91% of the balance sheet is funded by retail deposits. Finally, to Marcelino's point, we have good ready access to wholesale markets. You've seen those transactions in the first half of the year that we executed on. They give us ready access to debt capital markets.

[Dylan Minto, CFO at Shawbrook]

We also have significant collateral available to us that's pre-positioned with central bank BAU funding facilities, that also will allow us to be flexible in the second half of the year as to how and when we raise those deposits.

[Murray Long, Head of Investor Relations at Shawbrook]

Okay. Next question is from Benjamin Toms at RBC. Cost of risk was 57 basis points in the first half. Do you expect full year 2026 cost of risk to be at a similar level, or could it come down a bit?

[Marcelino Castrillo, CEO at Shawbrook]

Yeah, I think, look, if you walk through the bridge that Dylan covered in the presentation, you see that the underlying cost of risk is around 37 basis points if you exclude the development finance portfolio of pre-2022 loans. As we mentioned before, we're very confident on the credit performance of our book. We see very strong underlying trends that are consistent with what we have seen in the past.

[Murray Long, Head of Investor Relations at Shawbrook]

Okay. Staying with cost of risk, another question from Rob Noble at Deutsche Bank. What are the sensitivities and risk of further provisions against the pre-2022 development finance book?

[Dylan Minto, CFO at Shawbrook]

Yeah. The charge for the half year of GBP 15.6 million related to that isolated portfolio, as I said, a handful of cases, GBP 148 million, of which half of that charge related to the time value discounting of future cash flows. These cash flows and the exit cash flows had been extended. Nonetheless, a majority of that portfolio is now at practical completion. We expect, over time, for the portfolio to reduce. The coverage level is up at 35%. As we walked you through the bridge, excluding that portfolio impairment charge, the cost of risk would have been 37 basis points for the first half.

[Murray Long, Head of Investor Relations at Shawbrook]

Moving on to efficiencies. Question from Benjamin Toms. You printed a cost-to-income ratio of 36.4% in the first half. Your guidance for the full year is less than 38%, which you today reiterated. Can you talk us through the dynamics in H2, which will lead up to a step in your cost-to-income ratio?

[Marcelino Castrillo, CEO at Shawbrook]

Yeah. Look, I think in cost-to-income ratio, what we focus more on is the concept of efficient growth, right? For us, the most important element is how do we continue to grow with very low marginal costs. That's what you will continue to see. You will continue to see a cost profile similar to what you have seen in the slides. Of course, we haven't made any acquisitions recently, you won't see the benefit of those efficiencies that come on the back of integration, you will continue to see an underlying cost profile, which is very similar to the one we have presented today.

[Dylan Minto, CFO at Shawbrook]

I'd just supplement that with the reduction in the cost to average assets down materially down to 1.59%. Demonstrating that whilst in the first half versus the full-year consensus, there is some timing of the recognition of the gain on sale. When you look through that to the costs to average assets as a good indicator of efficiency, that is down year-on-year by a significant sum.

[Murray Long, Head of Investor Relations at Shawbrook]

Next question is from Piers at Investec. With regards to originate-to-distribute, is there an upper limit to volumes you're happy to securitize in a given period and is 2%-2.5% still a reasonable assumption for gain on sales?

[Dylan Minto, CFO at Shawbrook]

Yeah. Just as I'd said, a reminder as to the originate-to-distribute transactions for us are very deliberate. They provide us the optionality that we have to manage, not just balance sheet composition and capital, but also liquidity and the availability of collateral. As I'd said, with regards to the deposit market, having other options is valuable to us. We will continue to securitize the exposures we generate in our retail mortgage brands. Across The Mortgage Lender, across Bluestone Mortgages, they are exposures that lend themselves very well to the securitization markets. Appetite is strong in those markets. We will continue on a programmatic basis to both originate and to securitize those.

[Dylan Minto, CFO at Shawbrook]

Whether and when we sell down, if we sell down the exposures in the residual parts of those instruments will be determined by whether we find the market price point attractive and whether the debt capital markets are conducive to those trades at the point in time that we transact. We have said historically that we would seek to securitize between GBP 0.9 billion-GBP 1 billion per year. We have transacted in a vibrant market in the first half of the year, GBP 1.3 billion of exposures. The distribution capability of our retail mortgage brands is very strong, and it gives us that optionality that we are able to use to manage the balance sheet effectively.

[Marcelino Castrillo, CEO at Shawbrook]

Yeah. I think just to sort of echo that point, I think one is these are assets we like, and we will continue to write. Two, we will continue to securitize them because they give us that optionality in terms of funding. Whether we sell down the residuals or not will be down to very simple sort of economic calculation around accelerating the income or holding to maturity. That will depend on the markets when and when.

[Murray Long, Head of Investor Relations at Shawbrook]

Just staying on the originate-to-distribute theme. Dylan, would it ever make sense to use SRT rather than OTD as a way to manage your capital position now that the MREL issue has been taken off the table? Sorry, that's from Karine at Autonomous.

[Dylan Minto, CFO at Shawbrook]

To date, we have three effective levers for managing risk-weighted density. Originate-to-distribute is certainly one of them. We've been able to use that effectively, certainly prior to Basel 3.1. It's a very effective tool, as I say, with assets that lend themselves very well to the securitization markets. Other available capital efficiency tools we have are credit insurance. We will insure individual credit names to ensure we stay within our single name concentration limits and will insure risks over and above our own self-imposed single name concentration limits. We also have access to the ENABLE Build scheme to ensure we can continue to support through the support of the British Business Bank, we can continue to support developers and house builders across the United Kingdom. We have many tools available to us.

[Dylan Minto, CFO at Shawbrook]

Of course, we will continue to assess as to whether SRT is the right tool for Shawbrook going forwards, and that's something that always remains an option to us.

[Murray Long, Head of Investor Relations at Shawbrook]

Moving on. I'm going to group two questions together here. Marcelino, part of Shawbrook's business model is to perform regular bolts on M&A, as you did with ThinCats and Playter in 2025. Can you please give an indication which sub-sectors or other lending verticals look attractive to Shawbrook now for inorganic activity?

[Marcelino Castrillo, CEO at Shawbrook]

Yeah. Well, I think first of all, the priority for this year, as we have mentioned a number of times, is capital buildup ahead of Basel 3.1, of course, to support our organic growth and to pay our maiden dividend. Beyond that, we will look to do once those hurdles are met, we will look to further M&A. I think, going forward and there is a very attractive, very vibrant community of non-bank lenders in particular and fintechs in the U.K. that have excellent business models that are very close to the areas where we operate in. I think you can expect us to look into markets that are very similar to where we operate or close adjacencies to the markets we're already in. I think, for instance, Playter is a great example of that.

[Marcelino Castrillo, CEO at Shawbrook]

We made an acquisition of a small but extremely attractive future-proof business in a market we already operated in. We took the opportunity to move our functionality and our franchise into the new platform and grow a new platform and take the efficiencies from an existing infrastructure. That would be a good example of the things that you would expect us to look into.

[Murray Long, Head of Investor Relations at Shawbrook]

Next question is from Karine at Autonomous. Can you please walk through the likely capital position in the medium term post-Basel 3.1 and the situation where you are paying a regular dividend?

[Dylan Minto, CFO at Shawbrook]

Yes. As I walked through the bridge, the model of the business is one of strong capital accretion, and we have provided and supported the guidance to close the year at 13.2% or higher. We have a business model that generates mid to high teens return on tangible equity, offset by low double-digit loan book growth, putting increased risk-weighted assets onto the book. It's that delta that allows us to accrete capital, support the lending in the markets that we wish to support, whilst building capital to support a dividend, a maiden ordinary dividend payment. As Marcelino pointed to, Basel 3.1 kicks in on the 1st of January 2027, and that's a significant capital event for the balance sheet.

[Dylan Minto, CFO at Shawbrook]

We have been steadily building capital to support that, and we will continue to support capital to ensure we can remain in the markets that we wish to remain in and pay that maiden ordinary dividend.

[Murray Long, Head of Investor Relations at Shawbrook]

Okay. Marcelino, question from Grace at Barclays. Have you seen any changes in customer behavior over the first half? Can you give us your thoughts on the outlook for loan growth by segment over the next 12 months?

[Marcelino Castrillo, CEO at Shawbrook]

Look, by nature of the business and by nature of how conditions change, of course, you see changes to certain markets. H1, for instance, compared to maybe what we thought six months ago, we have seen very strong demand in our structured real estate business, where we tend to look at the larger property portfolios. Again, it's a business that we have built over the last couple of years, where we leverage our real estate expertise together with the underwriting capabilities of SME. We've seen good demand across some of our SME businesses. We have, as Dylan covered, JBR, our high-end motor finance proposition really driving very strong volumes to the point that we are allocating more capital into that franchise.

[Marcelino Castrillo, CEO at Shawbrook]

Other parts we've seen a slightly less demand, development finance is a good example in which the uncertainties across, especially through the Middle East war and the parallels to Ukraine potentially impacting to the cost of supplies and the likes have made developers logically a lot more cautious than they would've been maybe six or seven months ago. I would say all of those changes just fall into the BAU nature of the market we operate in. Again, being fleet of foot, agile, and with that diversified proposition that allows us to allocate capital where the best opportunities are, hold us in pretty good stead in these markets.

[Murray Long, Head of Investor Relations at Shawbrook]

Dylan, question from Gary Greenwood at Shore Capital. Do you expect to get any offset from Basel 3.1 impact through the Pillar 2 reduction?

[Dylan Minto, CFO at Shawbrook]

Thanks for the question. The loss of the SME scaler within Pillar 1 is expected to be passed back to banks in the Pillar 2A by way of a reduction to offset that increase in Pillar 1. We still await, as do many others, still await the final decisions as to what the bank's Pillar 2A is. We'll be in a position to disclose that as we go through the second half of the year and into the full year results.

[Murray Long, Head of Investor Relations at Shawbrook]

Thank you. With that, there are no further questions. I'll hand back to Marcelino for final remarks.

[Marcelino Castrillo, CEO at Shawbrook]

Excellent. Well, thank you. Thank you, Murray, and thank you everyone for joining us today. As I said at the outset, we've delivered a very strong H1. We're very pleased with the progress we have made, but more importantly, we think our model continues to be fit for purpose in a world that keeps changing, customer needs keep evolving, and we feel we're really well-positioned to continue to deliver that efficient growth in the future to come. Again, thank you very much for joining us. Thank you very much, Dylan, and hope to see you all soon. Thank you.

Participants

Analysts

• Marcelino Castrillo, CEO at Shawbrook
• Dylan Minto, CFO at Shawbrook
• Murray Long, Head of Investor Relations at Shawbrook